WH Smith chief executive quits after damning Deloitte audit report
The boss of one of Britain’s best-known retailers has quit the role after an investigation into the firm’s accounting practices uncovered major flaws.
WH Smith chief executive Carl Cowling said he would step down with immediate effect on Wednesday after the report, produced by Big-Four audit firm Deloitte identified weaknesses in the operations of the firm’s North America division.
The Deloitte review found “insufficient systems, controls and review procedures for supplier income across commercial and finance functions” as well as “weaknesses in the composition of the finance team” and inconsistent accounting practices in the division.
The review was commissioned after WH Smith in August fessed up to a major accounting misstatement, an admission which wiped tens of millions of pounds from its profits, causing shares to tumble.
The FTSE 250 firm said a “financial review” identified an overstatement of around £30m of expected headline trading profit in its North America division that was “largely due to the accelerated recognition of supplier income” in the country.
As a result the firm confirmed profit in North America would be revised down to £25m from previous market expectations of £55m, cutting overall headline profit to £110m.
The stock is down by almost 50 per cent since the start of the year, though shares rose by 6 per cent on Wednesday on news of Cowling’s departure.
“Whilst the issues identified in the Deloitte review arose in our North American division, I recognise the seriousness of this situation and as Group CEO feel it is only right that I step down from my position,” chief executive Carl Cowling said in a statement.
Dan Coatsworth, head of markets at AJ Bell, said: “No chief executive is going to survive an episode as catastrophic as the one that wiped £594 million off the value of WH Smith overnight.
“Carl Cowling was clinging on to his job the second WH Smith announced an accounting setback in the summer, and now he’s done the decent thing and stepped down.
“Even if Cowling hadn’t resigned, his credibility at WH Smith was shattered by the scale of value destruction straight after selling the UK high street business. That strategic shift was meant to be a defining moment for the company, but it has gone down in history for the wrong reasons.”